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A stepwise approach to the innovative step assessment - 2 February 2016
An innovative step is to an innovation patent as an inventive step is to a standard patent. It is a very low threshold that requires departure from the prior art that is ‘real or of substance’. Authority confirms that it is a lower threshold even than an inventive step for which only a scintilla of invention is required. 
The remarkable conclusion of all this is that an Australian innovation patent can validly cover an obvious combination of well-known features and thus can provide patent protection well beyond what is possible in many other jurisdictions.
A recent decision  of the Full Federal Court  set out the correct approach to the assessment of the requirement. Key passages of the decision are set out here, although the interested reader is encouraged to follow the source text.
The decision considered two patents governed by an earlier iteration of our Patents Act 1990 which provided that:
‘For the purposes of this Act, an invention is to be taken to involve an innovative step when compared with the prior art base unless the invention would, to a person skilled in the relevant art, in the light of the common general knowledge as it existed in the patent area before the priority date of the relevant claim, only vary from the [citable prior art] that make no substantial contribution to the working of the invention.’
The Patents Act 1990 (which remains in effect) now clarifies that the relevant prior art may be in or out of Australia.
The decision confirms  that ‘the task to be undertaken is to:
(a) identify the invention as claimed in the particular claim; this is not to be confused with loose concepts such as the “key idea”;
(b) identify the relevant common general knowledge;
(c) identify the relevant prior art information against which the invention as claimed is to be compared;
(d) identify the person skilled in the relevant art; and
(e) then pose and answer the question as to whether the claimed invention only varies from the particular single prior art in a way that makes no substantial contribution to its working’.
Mechanical Engineer & Patent Attorney
 The court of first appeal for Australian patent matters
 At paragraph 174